In preparation for an IPO, Jessica Alba’s The Honest Co., a maker of eco-friendly baby products, has raised $70 million at a valuation just shy of $1 billion and is beginning partnership talks to expand to China, Dow Jones VentureWire has learned.

“We believe being a public company is the best path for us going forward and it’s good to get that validation early on,” Honest Chief Executive and Co-founder Brian Lee said, noting that public-markets investor Wellington Management Company led the Series C round. “I can’t say when that will be, but we are definitely starting to think and act like a public company.”

Jeremy Liew, a partner with early investor Lightspeed Venture Partners, said Ms. Alba, the actress-turned-entrepreneur who co-founded the company in 2011, has leveraged her star power for the benefit of the startup.

“She is an international star. We’re starting to see a lot of demand from her fans around the world,” he said. “This idea for non-toxic, chemical free products has resonated around the world in developed and developing countries.”

Since launching in 2012 with its non-toxic diapers and other natural baby products, the California-based startup has grown quickly by blending its environmentally sensitive products with a social mission. Annual revenue is tracking to hit north of $150 million in 2014, or three times the revenue of 2013, according to Mr. Lee.

Roughly 80% of Honest revenue is from customers who subscribe to a monthly service delivering diapers and other consumable products on a recurring basis.

Along with the healthy lifestyle and cleaning products, which will soon include formula for babies and beauty products for moms, the startup is selling a feel-good mission. Like Toms Shoes Inc., Warby Parker Inc., Etsy Inc. and other e-commerce companies that use business to benefit social causes, Honest donates product and revenue.

The company established programs like diaper and crib donations as part of its business model, earning it a B Corp certification from nonprofit group B Lab.

“Nowadays it’s about corporate responsibility. The consumer today demands this of companies and we are doing our part to help in any way we can,” Mr. Lee said.

Although the company has expanded its retail distributors during the past year from Whole Foods and Costco to include Target, Buy Buy Baby and Nordstrom, just 20% of sales occur offline.

Mr. Lee said that mix is a good balance for the company for now and the company has intentionally held back on marketing efforts because it is now at capacity fulfilling orders.

The Series C funding round will be used to bankroll growth both in the U.S. and abroad.

Honest has been shipping to Canada for more than a year and is making plans to enter England and Australia. China is a major focus and a key reason for raising the recent round. Mr. Lee said he is in early discussions with potential partners but declined to provide details.

Along with Wellington Management Company, a handful of unnamed public financial institutions also participated in the round, as did all existing venture investors, a roster that includes Institutional Venture Partners, Iconiq Capital, Lightspeed Venture Partners and General Catalyst Partners.

The Honest Co., which employs 275, previously raised $52 million.

Through an Honest spokesman, Wellington declined to comment.

General Catalyst Partner and Honest board member Neil Sequeira said working with Wellington to lead the round was logical because the goal is an IPO.

“Having them as shareholders will help the team understand the metrics, traction and other things public-market investors are going to look for as they enter the market. Having them inside the tent instead of outside the tent makes that dialogue much more open.”

Comments (5 of 19)

I've observed for the past 25 years how Californians take old ideas brand them overlay a fantasy...movie,etc ...and sell it to the world. Let's talk about the people who actually founded this country on their blood sweat and tears...fighting for independence. People who really paid the price of freedom, such as the New Englanders. (I'm not mentioning the south because I'm not familiar with the south, I grew up in the Northeast) People chose an organic life style in New England way back when...composting, berkenstocks, farming,...and an intellectual pursuit versus materialism. It's a very grounded lifestyle, not for profit, rather an understanding of what life is really about. Chinese have lost their individual identity and maybe seeking such. Regardless, the noveau riche in China may buy this kind of stuff because an American star is involved, etc...but let's not, in any manner, suggest that they are looking for organic. Please study your economics. Most in china are trying to survive. They would buy this kind of stuff is because they are pursuing the false aspect of the American illusion, our stardom culture. Grow up. Most the of the undeveloped countries are more organics than you because they can't afford otherwise. The arrogance is overwhleming.
Jessica, get real. Give up all your fortune and fame and move to a third world country. Come back in five years....and maybe you will have credibility.
As far as I see it's all about greed. There's nothing organic going on here.

1:17 pm December 26, 2014

EricTaller wrote:

"Annual revenue is tracking to hit north of $150 million in 2014, or three times the revenue of 2013, according to Mr. Lee."

Is that net revenue? Or gross? If net then, yeah, valued at $1B makes sense, maybe more. But we don't know anything about the private capital. Is it definitely equity? Are they demanding payback? Is any of it debt?

Even if the numbers are inflated in the media, if they have decent business-people behind this company, it could have a good future.

It does seem a little "hyped" though. No comment from the most recent investor? Hey, if I was that investor and people were making guesstimates on the company I just put tens of millions of dollars into ... I would be the last person to go on the record to correct their assumptions downward.

Meanwhile if they are grossing $150 million this year $50 million last year(the article stated that 2014 was three times the revenue of last year)... and have taken $120million in funding over two years, that would not get anyone excited to invest further.

That would mean there has been $120 million invested to create $200 million over two years. Not saying that $40 million a year is a bad take...but that is only IF we are talking NET. If they are grossing less than half that (not an uneducated guess as this is a start-up in 2013) then you are looking at $120 million making ~$20 million or less.

You would have been much better putting your money into a DJIA etf and grow more than that with much less risk.

6:21 pm December 3, 2014

ed wrote:

she's pretty hot though.

3:49 pm October 26, 2014

Stella wrote:

As an Honest consumer for the last several years, I am disappointed in the direction this company will eventually take. In a few short years after going public we can expect to see the quality being reduced for fatter pockets of investors. I began using the diapers for my son and every new product they develop, I try, and I'm hooked! I just began taking the supplements and giving them to my son. My feelings about public companies are not in line with my values in life and I will likely find alternative products. Years ago we could only imagine great things taking off from small businesses going public. Today we have to limit our capitalism procedures and spread the wealth. Besides...most of the investors will probably be from overseas! There goes our American dream. I'm sure Walmart had good intentions going public too!

2:43 pm September 15, 2014

care wrote:

Jessica Alba may lose control over what she has created, if the company does get an IPO. Careful what you ask for there's always a price to pay.

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